There was more bad news for Hong Kong's beleaguered economy yesterday after international credit rating agency Moody's Investors Service put the SAR's A3 debt rating on review for a possible downgrade. The negative assessment comes just days after Standard & Poor's downgraded Hong Kong's sovereign credit rating by one notch on Tuesday. The Government said it strongly disagreed with S&P's decision, adding the global ratings agency had failed to understand authorities' recent intervention in the stock and futures markets. In response to the Moody's decision, the Government said: 'It is not unexpected that Moody's would want to review our credit ratings following recent developments in Hong Kong.' The Government's strongest criticism was against the agency's decision to cap Hong Kong's ratings by the mainland's, whose own debt rating is under review. Despite the very close economic relationship between the mainland and SAR, it was strictly 'one country, two systems', the Government said. 'Therefore it should also be 'one country, two ratings'.' The move by Moody's was said to reflect Hong Kong's deteriorating economy and a predicted drop in the Hong Kong Monetary Authority's foreign assets because of its stock market intervention. A downgrade could take Hong Kong's long-term foreign currency country ceilings for bonds, notes and bank deposits from its present A3, which reflects many favourable attributes and is considered upper medium grade, to Baa. The Baa rating denotes bonds lacking protective elements, or which are considered unreliable over a great length of time. Moody's is also reviewing for a possible downgrade its Prime-2 foreign currency ceilings for short-term debt obligations and bank deposits. Moody's senior analyst Deborah Schuler said the local economy had been battered by domestic and international crises that were outside the control of anyone in Hong Kong. 'We are now more than a year into the Asian financial crisis . . . and we've had one piece of bad luck after another regarding local, regional and even global economies,' she said. With Hong Kong firmly in recession, the most significant factor in terms of Moody's rating action was the view that this now appeared to be a prolonged downturn, Ms Schuler said. 'This is not a disaster scenario,' she said. 'We may have some minor adjustments in the rating and the direction is downward, but it's not Thailand or Korea, we don't see that happening here.' The agency said its review of Hong Kong's ratings would include an analysis of the likely effects of a prolonged period of financial market and economic instability on the SAR's fiscal position. Moody's said confidence in the pegged exchange rate was further undermined by market uncertainty over the future value of the yuan. 'These factors are causing the most serious economic downturn in Hong Kong's economic history bringing about a deterioration in Hong Kong's strong Government financial position.' In terms of bottoming out, Ms Schuler said the estimate was later rather than sooner. 'Instead of looking at some time in 1999, it's now 2000, or who knows when,' she said.